Category: TRADING

Can Dividend Yield Predict Stock Returns?

Dividend yield is a financial metric that provides insight into the income generated by an investment in the form of dividends, relative to its market price. Expressed as a percentage, the dividend yield is calculated by dividing the annual dividend per share by the current market price per share. This …

Profitability of Dispersion Trading in a Less Liquid Market

Dispersion trading is an options trading strategy that capitalizes on the spread or difference in implied volatility between index options and individual stock options. The basic premise involves selling index options while simultaneously buying options on individual components of the index. Traders expect that the implied volatility of individual stocks …

Covariance Risk Premium as a Predictor of Market Returns

Various prediction methods are employed in the stock market, leveraging diverse techniques and data sources. Fundamental analysis delves into a company’s financial health, examining factors like earnings, assets, and management. Machine learning and artificial intelligence have gained prominence recently, using algorithms to analyze vast datasets and identify patterns elusive to …

Does Kelly Portfolio Outperform the Market?

Position sizing is a critical element in effective portfolio management, playing a pivotal role in determining the overall risk and return characteristics of an investment portfolio. Proper position sizing involves allocating an appropriate proportion of capital to each investment, considering factors such as the investor’s risk tolerance, investment goals, and …

How Volatility and Commodity ETFs Impact the Markets

Exchange Traded Funds (ETFs) have undeniably transformed the financial industry, providing investors with unprecedented ease of access to diverse portfolios. However, their impact on the market isn’t uniformly positive. The surge in ETF popularity has raised concerns about potential distortions and increased market fragility. Critics argue that the sheer size …

Incorporating Volume into Volatility Forecasting

Volatility forecasting plays an important role in finance. Its importance lies in the fact that it enables us to effectively price options and plan trading and hedging activities. By providing insights into future market volatility, this forecasting becomes an essential tool for investors, enabling them to make informed decisions that …

Price Dynamics of Different Stock Sectors

The U.S. market is a vast and intricate financial landscape that can be dissected into several sectors, each representing a specific segment of the economy. These sectors are typically classified based on the type of goods or services they produce. Common sectors include Information Technology, Health Care, Financials, Consumer Discretionary, …